FAR 13.305-3—Conditions for use.
Plain-English Summary
FAR 13.305-3 sets the conditions under which imprest funds and third-party drafts may be used for purchases under simplified acquisition procedures. It addresses four core topics: dollar thresholds for imprest fund transactions, dollar thresholds for third-party draft transactions, the requirement that use be advantageous to the Government, and compliance with any additional agency conditions plus the policies and regulations referenced in FAR 13.305-1. In practice, this section limits these payment methods to relatively small purchases and requires the contracting activity to justify their use as a practical, efficient payment approach. The rule matters because it ties payment method selection to both fiscal controls and agency-specific policy, helping prevent misuse of cash-like instruments and ensuring the Government uses the most appropriate payment mechanism for the transaction. Contractors and contracting personnel should treat this as a gatekeeping provision: if any condition is not met, these methods should not be used.
Key Rules
Imprest fund limit
An imprest fund transaction may not exceed $500 unless the agency head has approved a higher limit. This is a hard dollar cap unless properly elevated through agency-level approval.
Third-party draft limit
A third-party draft transaction may not exceed $2,500 unless a higher level is authorized in accordance with Treasury restrictions. The transaction must stay within the applicable Treasury-based ceiling or approved exception.
Must benefit the Government
Use of imprest funds or third-party drafts is permitted only when it is considered advantageous to the Government. This requires a practical determination that the method is efficient or otherwise beneficial for the specific purchase.
Agency and policy compliance
Even if the dollar threshold and advantage test are met, the transaction must also comply with any additional agency conditions and with the policies and regulations referenced in FAR 13.305-1. Agency supplements and related payment rules remain controlling.
Responsibilities
Contracting Officer
Determine whether the purchase meets the dollar threshold, whether use of the payment method is advantageous to the Government, and whether all agency and FAR-related conditions are satisfied before authorizing or relying on the method.
Agency Head
Approve any increase above the standard imprest fund limit when agency policy allows a higher threshold. Ensure any higher limit is formally authorized.
Agency Payment/Finance Officials
Apply Treasury restrictions and internal controls governing third-party drafts and imprest funds, and ensure the payment method is used only within authorized limits and procedures.
Contractor
Accept and process the payment method only when it is properly authorized and consistent with the contract and applicable payment procedures; otherwise, use the normal invoicing/payment process.
Agency Acquisition and Finance Policy Offices
Establish and maintain any additional agency conditions governing use of imprest funds or third-party drafts, and ensure those conditions align with FAR 13.305-1 and Treasury requirements.
Practical Implications
This section is mainly a small-dollar payment control rule: if the purchase is above the stated limit, the payment method is generally not available unless a valid higher-level approval exists.
The phrase 'advantageous to the Government' requires judgment, so users should document why this method is preferable—such as speed, administrative efficiency, or local purchasing needs.
Agency supplements can be more restrictive than the FAR text, so checking internal policy is essential before using either payment method.
A common pitfall is treating the dollar thresholds as automatic entitlements; they are only one part of the test, and all conditions must be met.
Another risk is overlooking Treasury restrictions for third-party drafts or agency-approved higher limits for imprest funds, which can make an otherwise small purchase noncompliant.
Official Regulatory Text
Imprest funds or third party drafts may be used for purchases when- (a) The imprest fund transaction does not exceed $500 or such other limits as have been approved by the agency head; (b) The third party draft transaction does not exceed $2,500, unless authorized at a higher level in accordance with Treasury restrictions; (c) The use of imprest funds or third party drafts is considered to be advantageous to the Government; and (d) The use of imprest funds or third party drafts for the transaction otherwise complies with any additional conditions established by agencies and with the policies and regulations referenced in 13.305-1 .